1. Field of the Invention
The disclosed invention relates generally to conducting auctions, and in particular to restricting access to market information in online electronic auctions.
2. Description of the Background
Procurement and selling of supplies has traditionally involved high transaction costs. Particularly, the cost of information searching regarding suppliers and sellers and their goods and services has often been prohibitively high. The introduction of electronic commerce has introduced new methods of procurement and selling that lower some of the transaction costs associated with procurement. Online procurement, or business-to-business electronic commerce, matches purchasers and suppliers so that transactions can take place electronically. The terms “purchaser” and “buyer” are used interchangeably herein to describe the party that desires to purchase goods or services in an auction. The terms “supplier” and “bidder” are used interchangeably herein to describe the party that desires to sell goods or services in the auction. Three models for online procurement are catalog, buyer-bidding auction, and supplier-bidding auction.
The “catalog” model of online procurement allows customers to obtain information regarding products and services from a single supplier, i.e., single-source catalogs. Early electronic catalogs were developed by individual suppliers to help customers obtain information about products provided by the developing supplier and order those products electronically. Customers, however, were often not satisfied with such single-source catalogs but rather preferred to compare a number of competing products to facilitate a comparison of features and pricing. Thus, certain suppliers began to include competitors' products on their systems. By offering competing products in one catalog, those suppliers created “electronic markets.”
The electronic markets created by suppliers, however, could be biased toward the supplier offering the electronic market. Thus, unbiased electronic markets that promote competition were developed to further lower purchase prices.
For standard products and services, third party market makers compiled databases of related products and services from various suppliers to provide a single market from which similar products and services may be compared and through which those goods and services may be purchased. Purchasers may, thus, access the database of such a third party market, view information and pricing information related to each desired product or service, and order the desired products and services in a single visit to the third party database.
When many purchasers compete for the right to buy from one supplier, a buyer-bidding auction model is created. In a certain buyer-bidding auction, potential purchasers compete for a product or service by submitting one or more bids to a website operated by the buyer-bidding auction coordinator. After the bids have been received, the supplier may choose to accept the highest bid, thereby binding the high bidder to a contract for the sale of the product or service.
The catalog and buyer-bidding auction types of electronic markets, however, do not work well in some situations. For example, if the required product is custom made for the purchaser, it is difficult for suppliers to publish a set price in advance for a catalog market. Likewise, it is difficult for purchasers to specify all of the details of the product they want to purchase in a buyer-bidding auction.
Traditionally, when a company required a custom industrial product, procurement was made by a purchaser for the company who searched for potential suppliers and acquired custom price quotes from those suppliers for the needed custom product. The search process tended to be slow because suppliers had to be sought out and then negotiations had to take place. The search process also tended to be somewhat random because it often relied heavily on personal relationships between purchasers and suppliers. There were also significant costs associated with locating vendors, comparing products, negotiating, and paperwork preparation in a purchase decision. The cost of switching suppliers may also be prohibitive because of the cost of searching for other qualified suppliers. Thus, purchasers disadvantageously received price quotes from existing suppliers that were not the lowest price that could have been obtained by a more thorough supplier search. New suppliers were also placed at a disadvantage due to the difficulty and cost of marketing to purchasers who have existing suppliers.
As an alternative, purchasers may use on-line auctions having prequalified bidders to save money. The assignee of the present application developed a system, wherein suppliers downwardly bid against one another to achieve the lowest market price in a supplier-bidding, auction.
In a supplier-bidding auction, bid prices typically start high and move downward in a reverse-auction format as suppliers interact to establish a low price at the close of the auction. The auction marketplace is typically one-sided, i.e., one purchaser and many potential suppliers. Either goods or services may be purchased in an auction, and the goods may be of any type including, for example, office products, finished products, other products, parts, components, or materials. “Components” typically are fabricated tangible pieces or parts that are assembled into durable products. Example components include gears, bearings, appliance shelves, and door handles. “Materials” are often raw materials that may be purchased in bulk and that are further transformed into product. Example materials include corn syrup and sheet steel.
Furthermore, industrial purchasers often desire to purchase more than one component at a time. They may purchase whole families of similar components or groups of components that are related to one another by, for example, the final product into which they are incorporated. As an example, a purchaser might purchase a given plastic knob in two different colors, or might purchase a nameplate in four different languages. Those parts may be so similar that it is only practical to purchase the parts from the same supplier because, for example, all of the knobs can be made using the same mold. Those items are therefore grouped into a single lot. Suppliers in industrial auctions may, therefore, be required to provide unit price quotes for all line items in a lot.
The process for a supplier-bidding auction is described below with reference to FIGS. 1 and 2. FIG. 1 illustrates the functional elements and entities in a supplier-bidding auction 56, while FIG. 2 is a diagram that identifies the tasks performed by each of the involved entities.
The supplier-bidding auction model typically requires that the bidding product or service be defined by the purchaser 10. An auction coordinator 20 may work with the purchaser 10 to prepare for and conduct an auction 56 and to define potential new supply relationships resulting from the auction 56.
In the example illustrated in FIG. 2, the purchaser 10 provides data to the coordinator 20 in the Initial Contact phase 102 of the auction 56. The coordinator 20 then prepares a specification 50 for each desired product 52. Once the product 52 is defined, potential suppliers 30 for the product 52 are identified. The coordinator 20 and purchaser 10 work together to compile a list of potential suppliers from suppliers already known to the purchaser 10 as well as suppliers recommended by the coordinator 20.
The purchaser 10 makes a decision regarding which potential suppliers 30 will receive invitations to the upcoming auction 56. Suppliers 30 that accept auction invitations are then sent notices regarding the upcoming auction 56. In certain situations, suppliers 30 may also receive software to install in preparation of participating in the auction 56.
In the RFQ phase 104 illustrated in FIG. 2, the coordinator 20 works with the purchaser 10 to prepare a Request for Quotation (“RFQ”) 54. The coordinator 20 collects and maintains the RFQ data provided by purchaser 10, and then publishes the RFQ 54, and manages the published RFQ 54. The RFQ 54 includes specifications 50 for all of the products 52 covered by the RFQ 54. In the RFQ 54, the purchaser 10 may aggregate products into job “lots.” The purchaser 10 may also separate unlike products into separate lots to best fit the needs of the purchaser 10 and the capabilities of suppliers 30. Lots, therefore, may include such things as aggregations of similar parts or products that are desired to be purchased together. That type of aggregation allows suppliers 30 to bid on that portion of the business for which they are best suited.
During the auction 56, bids 58 may be placed on individual lots (and their constituent parts 52) within the RFQ 54. While suppliers 30 may be required to submit actual unit prices for all line items, the competition in an auction 56 is generally based on the aggregate value bid for lots. The aggregate value bid for a lot depends upon the level and nix of line item bids and the quantity for each line item. Therefore, suppliers 30 may submit bids at the line item level, but compete on the lot level.
In the Auction Administration phase 106, the coordinator 20 coordinates the auction 56 and administers the auction setup and preparation. The coordinator 20 sends an RFQ 54 to each participating supplier 30, and assists participating suppliers 30 to prepare for the auction 56.
In the Conduct Auction phase 108, suppliers 30 submit bids 58 on the lots and monitor the progress of the bidding by the participating suppliers 30. The coordinator 20 assists, observes, and administers the auction 56.
When the bidding period is over, the auction 56 enters the Administration of Auction Results phase 110. In that phase, the coordinator 20 analyzes and administers the auction results, which are viewed by the purchaser 10. The purchaser 10 begins to qualify the low bidding supplier 30 or suppliers 30. The purchaser 10 generally retains the right not to award business to a low bidding supplier 30 based on final qualification results or other business concerns.
In the ensuing Contract Administration phase 112, the coordinator 20 facilitates settlements 60 awarded by the purchaser 10 to suppliers 30. Contracts 62 are then drawn up between the purchaser 10 and suppliers 30.
The auction 56 is conducted electronically between potential suppliers 30 at their respective remote sites and the coordinator 20 at its site. As shown in FIG. 3, information is conveyed between the coordinator 20 and the suppliers 30 via a communications medium such as a network service provider 40 accessed by the participants through, for example, dial-up telephone connections using modems, or direct network connections. A computer system may be used to manage the auction 56. The computer system may have two components: a client component and a server component. The client component may operate on a computer at the site of each potential supplier 30 or may be accessed via a supplier computer. The client component is used by suppliers 30 to make bids during the auction 56. The bids are sent via the network service provider 40 to the site of the coordinator 20, where they are received by the server component of the software application.
The purchaser 10 may access the auction 56 through the auction coordinator 20 as illustrated in FIG. 3, or may alternately access the auction 56 through a network service provider 40.
In auctions 56, and in particular reverse auctions, it is desirable that bidder/suppliers 30 actively participate in the auction 56 by submitting lower bids on a regular basis throughout the duration of the auction 56. It is expected that each bidder 30 will consider factors including bids of the other bidders 30, their own costs, and potential efficiencies that may be had that will reduce the cost to the bidder 30 such that the bidder 30 may submit a reduced bid to the purchaser 10. In certain auctions 56, however, it has been discovered that certain bidders 30 hold back their bids until late in the time allotted for the auction 56. Other bidders 30 choose not to bid at all during the auction 56. A decision not to bid during an auction 56 may be made for many reasons. One reason for not bidding occurs when the bidder 30 is not desirous of being awarded a contract in the auction 56, but rather is gathering information, such as, for example, the price at which suppliers 30 are willing to provide goods and services. When bidders 30 hold their bids until late in the auction 56 or do not bid at all, the benefit of competitive bidding to the purchaser 10 is lost or reduced. Furthermore, purchasers 10 and bidders 30 alike may prefer to avoid providing such information to non-participants to protect the confidentiality of the auction 56.
Thus, there is a need for a system and process whereby bidders 30 are encouraged to place a bid 58. There is a further need for a system and process whereby bidders 30 are provided with an incentive to actively participate in an auction 56 by submitting additional, progressively lower bids 58 throughout the auction 56. There is also a need for a system and method of bidding that protects bidding confidentiality.